I wanted to just share with you as we encourage questions. You'll see a Q&A box at the bottom of your screen. Type your questions in there, and the management will respond. We have with us Anthony Coniglio, CEO of NewLake. Anthony, why don't you get started?
Great. Thank you very much, Michael, and thanks everybody for joining us today. My name again is Anthony Coniglio. I'm the President, CEO, and founder of NewLake Capital Partners. We are a leading real estate capital provider to the cannabis industry, kind of a unique sector. What I want to talk to you all about today, we could obviously read our Safe Harbor statement. What I'm going to talk today and try to move through in really 12 to 15 minutes so we could open it up for Q&A. I think that's really the great opportunity for these Sidoti conferences to have that engagement. I'm going to touch on our experienced team, and it's really important because it directly impacts the quality of the portfolio and the durability of our cash flows. We can talk about cannabis as a growth story.
It is absolutely in a long-term growth trajectory. We were one of the first early movers, and that's allowed us to create scale and actually have less competition today than we did when we started the company six years ago. We'll talk about our portfolio as well as our financial position, and we can certainly get on my favorite, but not so favorite topic of being undervalued versus peers. Before I get into the numbers, I do want to draw a contrast with potentially some of the other companies that you may be looking at with the Sidoti conference because we've done the conference, great conference a couple of times, but we often hear from investors, "Boy, I'm surprised that you are trading on the OTC. I'm surprised that you're only in a small cap conference." I want to be clear.
The reason we're traded on the OTC is because we focus on the cannabis industry. We run our company to comply in all respects, to be listed on New York or NASDAQ, but the only reason we're not listed on those exchanges, they won't have us because our tenant base is entirely the cannabis industry. We do have one competitor that's listed on the New York Stock Exchange. They went public in 2016 and were grandfathered in. Some of you that know the sector may be thinking, "Why are they on and you're not?" They were grandfathered in before the rules changed. We run our business comply in all respects from a governance perspective with New York and NASDAQ requirements. We also, from a financial profile perspective, compared to a lot of companies, we've been profitable from the inception of our business.
We've generated significant free cash flow last year, and we pay a dividend. We've raised our dividend nearly 80% since our IPO in 2021. Right now, we have a dividend yield of over 10%, and I'll talk a little bit about why that dividend yield is so high. Let's hit us by the numbers. Founded in 2019, IPO'd in 2021. As I said, we have deployed almost $450 million over the last six years as a real estate investment trust. A key metric for us, for those of you not familiar with REITs, is our available funds from operation or AFFO. Let's think of that as our measure of free cash flow. What we did last year is we paid out 83% of our free cash flow in the form of dividends and obviously retained the other 17% on the balance sheet for future growth.
Today, we have 33 properties. To understand our business, within those 33 properties, 15 of those properties are cultivation facilities and 18 of them are dispensaries. For those of you not familiar with cultivation or marijuana cultivation, do not think outdoor. There is that segment, and there are some people that grow, but this industry has become fairly sophisticated. When you hear us talk about cultivation facilities, while it is 15 out of 33 properties, it is 92% of our capital. Think industrial buildings. These are 100,000, 200,000 sq ft industrial buildings that have been modified or specialty built to grow cannabis in an indoor environment. They tend to have HVAC, water, and electric over and above what a normal industrial piece of real estate would have. Therefore, these properties have a premium value in the context of the cannabis industry. That is our 33 properties.
Because we're focused on a nascent industry and a growth industry that's highly regulated, such as cannabis, we do get a premium on the rents that we charge, what we refer to as a cap rate. When you look at the yield on our real estate portfolio, it's yielding 12% on revenue. That's before we even talk about what leverage we have. Just the raw investment dollars that we've put into these buildings in terms of rent is yielding us 12%. That's a real premium over industrial and retail properties. We're getting that premium because of the risk profile of the customer base and that disconnect between state and federal law, which is really why we stepped in, and there were a few providers at the time. I want to talk about our very low debt to EBITDA.
We think this is probably the lowest levered real estate investment trust that's publicly traded out there. 0.2 x debt to EBITDA. We have $7.6 million of debt outstanding on $440 million of assets. Almost not even levered up at all. We do have a long duration portfolio. Again, our model as a sale-leaseback REIT is we purchase properties from and for the cannabis industry, and we enter into long-term leases, typically +15 years. The remaining weighted average lease term on our properties today is over 13 years. We have long duration with an above market yield that's generating that significant free cash flow that we have. Talk about our team. You could look at the details. Suffice to say, our management team has significant experience across financial services, real estate, as well as banking, restructuring, etc.
I do want to touch on our board, though, because when we started NewLake in 2016, one of the things we recognized is this is not only a real estate business, it is very much a cannabis business. We needed to make sure that we had expertise in cannabis within our organization. A couple of people I'll point out on these pages, one Pete Kadens, who joined us from Green Thumb Industries. He was the founder and co-CEO of that company, really, really understood and understands the cannabis industry, the facilities, the licensing, the regulations, the balance sheet, the P&Ls, the people. What we've worked, what we've done over the last six years is institutionalize his knowledge in creating our underwriting approach. I think that's why we have, in my opinion, one of the best portfolios of anybody that focuses on providing capital to the cannabis industry.
There would be Roman recently joined us, also spent nearly a decade at GTI. On the previous page was Joyce Johnson, who's a lead director at AYR Strategies, another leading cannabis company. We also have significant real estate experience, whether it's Gordon Dugan on the previous page, our Chairman, who has over 30 years of net lease REIT experience. He was the CEO at W. P. Carey as well as Gramercy Property Trust and brings us decades along with Pete Kadens and David, excuse me, along with Scott Marte and David Weinstein, decades and decades of real estate experience. We are combining the real estate and the cannabis experience to come up with an underwriting and portfolio management approach that we think has a differentiated performance versus any of our peers. Let's talk about growth.
Growth in the cannabis industry has moderated recently, but there are long-term growth trends at play here. You can see that one of the leading organizations that tracks performance in the cannabis industry is showing that we should have a 7% compounded annual growth rate through 2029. This growth will come as the market continues to expand, as the industry converts illicit sales into legal sales. Here's where I want to pause. What people don't realize is there is a very significant cannabis market today in the U.S. It's estimated to be over $100 billion. The problem is two-thirds of that roughly is sitting in the illicit market. Part of this story is about converting those illicit sales into the legal channel.
We see as states continue to legalize for medical and recreational purposes, as we sit here today, nearly half the country resides in a state that has recreational cannabis that's accessible to its residents. We are going to continue to see these states turn on, again, medical and recreational. That is going to be part of fueling that growth as well as that conversion from the illicit channel to the legal channel. One of the interesting underlying trends here is this conversion of a younger cohort moving away from alcohol and to cannabis as a way to obtain the effect that they're looking for, whether it be on a Thursday, Friday, Saturday night.
Not only are people consuming cannabis to help sleep, for other medical purposes, to help deal with nausea, vomiting, whether it's a cancer patient or anxiety and depression, or as a way to move off of opiates, but we are seeing cannabis step in as a replacement, and I would argue a healthier replacement to alcohol. That trend has been occurring, and we think that trend will continue and will add to the state turn-ons and add to the growth in the category. A couple of catalysts here, and I'm going to talk for five more minutes, and we'll open it up for Q&A. I hope you're populating the Q&A. That's the better part of this session is when we get to interact. A few catalysts at the federal level. It's great to see that there's potential reform across all three segments of our federal government.
In the administrative segment, you've got for the first time ever, you had both presidential candidates in the last election embracing cannabis and supporting cannabis reform. President Trump supported recreational cannabis in Florida, where he's a resident, and he said he was voting for recreational cannabis in the state. He also supports the rescheduling of cannabis to Schedule III, as well as various legislation that has been proposed over the past couple of congresses that could have meaningful change for the industry. Within the legislative segment of our government, we do see that legislation getting proposed each congress. We will see what happens under this administration. We've certainly been disappointed in previous administrations, but heading into the election and voicing specific support for some of these acts, we think we could see in this administration some movement in Congress.
Within the legal channel, let's not ignore that there are various legal routes, various legal processes unfolding. Two of note, one very popularly, David Boies, who is a very famous and well-regarded lawyer who has argued in front of the Supreme Court, has taken on a case in the state of Massachusetts where the plaintiffs are arguing that the Controlled Substances Act, in terms of its ability to regulate cannabis within state lines, is unconstitutional. They have made their way through a couple of circuit courts, and now they're in the federal appellate court. This case is designed to get to the Supreme Court. In fact, one of the Supreme Court justices, Justice Thomas, really invited this type of case a few years ago in one of his dissenting opinions for another cannabis-related case that the court decided not to take.
We'll have to watch that one. It could be really interesting because some of the lower courts said there is a case there. They just do not have the authority to overturn a Supreme Court precedent. It will be interesting to see how it gets to the Supreme Court. In addition, we're following very closely various cases around the country and various federal circuit courts around gun rights. We have a number of federal circuit courts that have ruled that the federal government cannot take away your Second Amendment rights. Some federal circuit courts have said it is constitutional that you could allow a state legal cannabis user to be prohibited from possessing firearms. We have that disconnect in the federal circuit court, and that's really ripe again to get to the Supreme Court and have the Supreme Court adjudicate what would happen.
My takeaway from this is there's many catalysts for additional cannabis reform on the horizon. It's great to see all three branches getting involved. I'm going to skip over our portfolio. We'll stop briefly on our portfolio overview. I want to get to questions. We have 13 tenants. We have our top three tenants or some of the leading tenants in the industry, Cresco, Curaleaf, and Trulieve. These are companies that reported earlier. Trulieve, in particular, I'd note, has significant gross margins generating free cash flow. These are companies that are certainly leaders in the industry and we think will be the long-term winners in the sector. When we look at our underwriting approach, this really is key.
I talked to an investor recently, and they said, "Wow, you put up 10% AFFO per share growth in 2024 in the face of what was a very, very difficult cannabis environment. What did you do in 2024 that allowed you to have such great performance and outperformance versus peers?" My comment was, "We didn't do anything in 2024 that did that. It was really what we did in 2021 and 2022 in making the right investment decisions in the previous years that set us up to be able to collect rent and deliver that performance for our shareholders." There are three key pillars to our underwriting approach. Obviously, tenant quality because these are long-duration contracts that we enter into, the leases. Importantly, within tenant quality, it's that tenant's ability to survive within that state construct, be able to grow, and be able to raise capital.
These businesses have voracious appetites for capital. We take our collective experience to make that assessment. Number two, the cannabis market. We've been focusing since inception on limited licensed jurisdictions. You can see in the chart here that some jurisdictions, like in Oregon or in Washington State, have thousands of operators. It is a lot of competition, very low margin, very difficult to be profitable. If you focus on a state like Pennsylvania, one of our top three states, where there is a limited number of operators, it means better margins, better cash flow, better ability to pay rent. Also, it means that we will have the opportunity to repurpose that property to another cannabis user because that license in and of itself has intrinsic value and we will see demand.
That is how we have seen, by and large, this play out over the last three years during the difficult period of the industry. Of course, real estate. We are always looking at the real estate, its value within the cannabis ecosystem, but also its value away from the cannabis arena, if ever we had to repurpose it away from cannabis. Importantly, within this segment, we focus on EBITDAR. That is EBITDA plus rent. We want to make sure that that property can generate sufficient free cash flow over the term of the lease to be able to pay rent. It is a simple concept, but critically important in underwriting the industry. When you look at most of the problems that have occurred across our competitive landscape in their portfolios, I think it has been the lack of EBITDAR that has created those issues.
I'm going to skip over some of our portfolio statistics because I do want to get to Q&A, but I'd like to close out on being undervalued versus our peers. Again, here, on every metric, I would view that we're undervalued versus our direct equity REIT peer or even our mortgage REIT peer. People say, "But all right, Anthony, you have over a 10% dividend yield." That means one of two things. It either means you have a leverage problem or you have a terrible portfolio. At an 83% payout ratio, the inverse of that means 17% of our portfolio can stop paying rent and we could still cover our dividend. I do think we have one of the best portfolios in the industry. I'd put it up against anybody's. I don't think it's a portfolio issue.
From a leverage perspective, 0.2 x debt to EBITDAR, $7 million of debt on $430-$440 million of assets. It is not a debt problem. People say, "Well, then why are you trading at such a high dividend yield?" It is all about the exchange. It is all about the liquidity. Because we are traded on the OTC, there is limited custody available, which limits the institutional bid. Here is the opportunity for the smaller organizations and the retail investors out there who can step in front of that institutional demand before those catalysts occur. We could get uplisted to an exchange that allows institutions to participate. There are some real technical features that are keeping us on the OTC and keeping the liquidity down and keeping this valuation inversion at play. With that, I do want to open it up for Q&A.
I'm going to stop sharing so I can see the questions. Okay. Can you share some potential state-level catalysts which may be most beneficial? Yeah, I'd love to share actually a couple of statistics. In the last election, Florida was voting for recreational cannabis, and the governor, DeSantis, ran very, very hard against the ballot initiative. It still received over a majority, even with the governor running so hard, received 53-54% approval. It needed 60% to amend the state constitution. It failed, but it absolutely garnered a majority of support. Also, Missouri, a couple of years ago, again, a red state, Missouri approved legalizing recreational cannabis at the ballot box with, I think it was 57% of voters approving.
Kentucky, which announced a medical marijuana program last year at the ballot box, this past November, voters had the opportunity to say if they wanted a cannabis business in their community. Of the 106 communities within Kentucky that went to the ballot box to vote on a cannabis initiative, every single one of those supported having cannabis businesses in their area. That is significant because there is very much a NIMBY element to that ballot question. All of them passed, some of them with as much as 70% support. Kentucky being a red state. Kentucky is a catalyst. They are going to put a new program in place that was announced last year that they started handing out licenses. That is one of those states. Pennsylvania converting from medical to adult use is another exciting catalyst for the industry.
The governor has proposed it in his budget this year, and it's being talked about in the statehouse, and we'll see if they can get that done. With five of six border states having adult use cannabis, Pennsylvania really is left out, particularly with its key competitor, Ohio, in terms of not having an adult use program. Minnesota is set to launch their adult use program hopefully later this year. There are other states that are looking at various programs. We know Virginia has put an adult use bill on the governor's desk. We actually don't think he's going to sign it, but we do see more and more states taking on cannabis reform.
Or even Georgia, as an example, has a medical program and is currently considering expanding the conditions available for medical marijuana to be prescribed, which would significantly expand the availability of product in that state. How has the competitive landscape changed, evolved, and have the barriers to entry changed? I think the barriers to entry have completely changed. I have not seen a new competitor get created for this sector in years, literally in a couple of years. And I've been around, you know, I've been at it for over 35 years, various businesses. I've not seen a business that has fewer competitors six years after it started. That's really a testament to the portfolio.
There are a number of competitors that started in 2019, 2020 that had portfolio issues and have not had the opportunity to continue to persist, gather capital the way we have, and have the capital availability to continue doing transactions. In fact, we closed a transaction in the first quarter that we announced was a dispensary for Cresco. The competitive landscape has only shrunk, expanding our opportunity to invest. What states currently look most attractive for new investments? I'd say Ohio is interesting to see as that adult use program continues to grow. In fact, that deal I just mentioned was in Ohio for the dispensary. I think Kentucky can be pretty exciting. It looks like it's going to be set up as a limited licensed jurisdiction. We think there's some real good opportunities in Kentucky in the near term.
Can you talk about cultivation versus dispensary profitability? Sure. First off, we like both cultivation and dispensary properties. We like investing across the ecosystem. In terms of profitability, unfortunately, it depends. It depends on the state. It also depends on the operator. It depends on how that state is set up. For vertically integrated companies, typically we see some of the best margins. The example I would show you is Trulieve. They have some of the better margins in the industry, and they're vertically integrated in Florida. It's their home state. They're the largest in the state of Florida. It allows you, by selling into your own retail outlet, to preserve margin for your own bottom line. We very much look from a credit perspective at those vertically integrated platforms as having a better platform.
There are some states, like Massachusetts, where they limit the number of dispensaries you can have. If your cultivation isn't sized properly for your distribution capability, you can end up having to sell into the wholesale market at lower margins. I apologize, but it's a little bit of a depends there. It's a key part of what we look at when we're underwriting transactions. What does your pipeline of deals look like? You know, pipeline in this industry is variable. I would say our pipeline isn't as robust as it was two years ago. Part of that is the CapEx cycle has diminished for the industry. If you went back a couple of years ago, we were having more buildout in Florida. We were having more buildout in Pennsylvania. People were getting excited heading into the Ohio ballot initiative.
Missouri was getting off the ground. There were many more state initiatives that were driving demand for real estate capital. We just have fewer initiatives today. We are looking now at what would be a smaller pipeline relative to where it was a few years ago. We think that pipeline will evolve and expand as Kentucky starts to get ramped up, as Ohio launches more of what we would call a traditional product set for an adult use market, as we see New York really get its feet under it for an adult use program. How has the pricing dynamic evolved? Is there much in the way of pricing power to the end consumer? Again, that is a state-specific question. If you were to look at Florida, you look at most states.
As you see more and more dispensaries come into the state and open up in a state, you actually see pricing to the end consumer go down as you get more competition. Interestingly, you actually start to see volumes go up and sales go up because the lower the price point, the easier the conversion from the illicit market. The more cost-competitive legal product can be with an illicit product. Those dynamics do play out from state to state. They vary. An example of how significant it can vary is Michigan pricing. There is significant competition in Michigan given the unlimited nature of the licensing. There are a lot of retail outlets there. From Illinois, with a more limited license construct, the pricing is higher.
You get some Illinois residents going over to Michigan in order to take advantage of a more competitive pricing environment. Have you been active on the share repurchase program, and how do you view that use of capital versus other options? I can't speak to what we've been doing in the first quarter. We did report in the fourth quarter that we had not yet tapped into our share repurchase program during 2024. If you were to go back in previous years, we did aggressively utilize our share repurchase program when we think our stock is undervalued. We're always looking from a corporate finance perspective. We're always looking at utilizing our capital to invest in a new property or to invest in our own stock and make accretive acquisitions.
The last time around, when we deployed over $10 million in our stock repurchase program, the average repurchase price was about $13, $13.01, creating significant value for our investors. We are not afraid to use it, and we are always looking at deals, deciding, is it a better return for our investors to utilize that capital in new transactions or to be buying back our stock? Is there an adequate level of talent and expertise available within the industry in order to support the long-term growth rates forecasted? Yes, I do believe that. It is part of what we do in our underwriting process. The more that cannabis becomes normalized, the more we see people attracted to the industry. People are surprised that there are nearly 500,000 people employed by the legal cannabis industry in the U.S.
It's a significant component of job or was a significant component of job growth over the last five to seven years. With the normalization of cannabis, and when we see positive articles in The New York Times or recently, over the weekend, The Wall Street Journal ran a very positive article on the Missouri market. As we see this industry more mainstreamed and more normalized, we see really talented individuals coming from outside the industry in finance roles and in leadership roles that I think will be part of growing this industry into the future. Some great questions, some great questions.
If you don't mind one more, Anthony, by way of.
Please, Michael, I'd love it.
We're heading out of time. Could you just summarize the value proposition for NewLake? Why should an investor consider investing in your company and why now?
Yes.
I go back to the dividend yield. At well over 10% with a well-covered dividend, an 83% payout ratio, we believe that dividend is safe for investors. With those catalysts on the horizon that I talked about across all three branches of our government, we think investors are getting well rewarded to wait for those catalysts and to be in front of those institutional investors. There is a dropdown on our website because of the custody issue I was talking about before. We do have a page on our about the company, which is where you can buy our stock. Charles Schwab is where I've bought my secondary purchase shares. We know people have purchased at Fidelity and other platforms, StoneX, as well as Interactive Brokers. There is a dropdown of organizations.
That value proposition is investing in a business with a very attractive yield that's very well covered, one of the best portfolios in the industry that focuses on cannabis. You get paid for those catalysts that are on the horizon, whether they be legislative or administrative in nature. It looks like we have time to squeeze in one more question. Could we just come back to the illicit market, two-thirds of the volume? What's the catalyst that will convert that illicit market into the legal market? Safety, I think, is a big one. When I talk to people, I think a lot of us probably know people who've got their guy, as they would say, or have been consuming cannabis out of the illicit market. When I talk to people, they'd rather buy a product that's been tested and they know exactly where it's coming from.
Safety is a key concern as well as price point. As the price comes down, you see the illicit market diminishing in relevance. We've seen that happen in Germany, quite frankly. Germany legalized last year, and you saw a significant transition from the illicit market to the legal market. It also helps that it's being covered under insurance in Germany. We've seen similar dynamics in Canada as well. Our friends to the north, when they legalized in 2018, that price point came down significantly and really converted. I think it's about safety and it's about price. I see a question here. Do you see any potential changes in digital payment laws and the cash requirement situation? I do. I think that would come with the SAFE Banking Act. This is an act that's passed Congress eight times, but never passed the Senate.
It did have a hearing and passed out of committee, the banking committee in 2023, but never was brought to the floor by Schumer for a floor vote. If you were to get the SAFE Banking Act, that act is entirely about getting—well, it is not entirely anymore, but it was created about getting this industry out of cash and into the traditional payment system. The reason I say not entirely is because the only thing that has been added was de-banking. We all know at the beginning of this administration, de-banking, and in January, February, there were a lot of hearings around de-banking. De-banking is part of SAFE Banking, but also getting cash out of the system. I do want to address one potential misnomer. Some people think we take cash for rent.
If you can't figure out how to get banks, there's over 500 banks that serve the cannabis industry today. If you can't figure out banking, you shouldn't be a tenant of ours. We get all of our rent through traditional wires.
Terrific. Excellent presentation, Anthony. Thank you very much, Anthony and NewLake Capital. Thank you all for joining us.
Thank you, Michael. Appreciate having you. Thank you, everybody, for the great questions. NewLake.com.
Great.